The major focal point of the week was undoubtedly the series of central bank interest rate decisions, featuring the Bank of Japan, the Federal Reserve, the Bank of England, and the Swiss National Bank.
Kicking off proceedings was the BoJ, which was widely expected to shift its interest rates from negative to positive territory. The decision indeed came through with a 20 basis point hike, lifting rates from -0.10% to 0.10%. As it was mostly priced into the market this move didn’t trigger significant market movements involving the Pound.
Next in line was the Fed’s interest rate announcement, which held rates steady, in line with market expectations. However, it was Jerome Powell’s post-decision commentary that stirred the markets, as he hinted at the possibility of three 25-basis point cuts throughout the year. This commentary led to a strengthening of the Pound against the USD.
The SNB took market participants by surprise with an unexpected 25-basis point rate cut, resulting in considerable retracement for the Swiss franc against major currencies. The Pound notably gained around 1.3% against the CHF.
Attention then turned to the BoE, which opted to maintain its current interest rate level. However, the shift in sentiment was evident as two members, previously in favour of a rate hike, changed their stance to a hold position. Governor Andrew Bailey’s remarks suggesting potential rate cuts in the future led to a significant drop in the Pound, erasing gains made against the USD and resulting in a further loss of around 100 pips by the following morning.
Beyond the interest rate decisions, the release of key economic data added to the market’s volatility. Notably, the UK’s CPI came in slightly lower than expected, while retail sales showed a modest increase. PMI figures for the UK, Eurozone, and US were also released, with the Eurozone reporting the weakest results.
Looking ahead, the coming week appears relatively subdued in terms of data releases, with the US expected to publish GDP and Consumer Confidence figures. The dearth of major UK data may hamper the Pound’s ability to make significant gains.